Land Trust Blog
Why Should You Plan Ahead?
by Randy Hughes on February 24, 2009
Do you wait until your house is on fire to buy fire insurance for your home? Why would you work so hard to acquire assets and build a large net worth and not learn how to protect those assets from attack? Some people work an entire life time building their estate just to lose everything to a frivolous lawsuit. Does this sound like your way of thinking? We hope not.
Hopefully, you are not naïve enough to believe what you were taught in school, that our judicial system is fair. Once you have two cents to rub together, you can and will face an attack.
It is especially hard to protect real estate from attack as apposed to stocks, bonds and cash. Real Estate is attached to the ground and cannot be moved from jurisdiction to jurisdiction for protection (or can it?). With the simple stroke of the pen any judge with jurisdiction over the dirt can undo lots of fancy planning. The judge will bend the law if necessary to provide a justification. It is best to extract and protect the equity in real estate if trouble comes. We have actually been in front of a judge that said, “I do not care what your lease says, I am going to rule against you anyway.”
The bottom line is that you should never trust our judicial system to be fair. Sometimes, if you can afford it, our system will surprise you and do the right thing. However, never ever count on this.
The beauty of asset protection planning is that you never have to trust the judicial system to be fair. You make it fair by your actions and planning ahead.
Recently, a man named Madoff cheated thousands of investors out of billions of dollars. The Madoff fiasco is a crystal clear example of how you can be financially blindsided in this world. It is the perfect lesson for why your assets should not be in one basket (or one land trust). Your assets should be placed into separate land trusts to insulate each property from the other.
Start now or forever hold your peace!
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Fraud on a Trustee
by Randy Hughes on November 08, 2008
Most everyone who studies Land Trusts knows that the Beneficial Shares (the interest held by the Beneficiary) are assignable by the Beneficiary to a third party. But, what is interesting to note is that the assignment is NOT valid until accepted by the Trustee. The Trustee may require seeing the original assignment with witnesses, notaries or both to confirm the transaction.
Since the Power of Direction is typically transferred along with the Beneficial Share, it is critical that the above formalities be observed so the Trustee may accept the new owner as a Director of the Trust too!
This historical legal procedure has evolved to prevent fraud on the Trustee AND the Beneficiary by an individual who might fabricate an Assignment form in the attempt to steal the property.
What is interesting about all of this from an asset protection standpoint is consideration of a judge ordering the transfer of Beneficial Interest to the creditor of a debtor in default (as judgment relief). If the judge orders the Beneficial Interest (BI) holder to assign the BI over to his/her creditor, the assignment will not be legal until the Trustee accepts it. If the Trustee resides outside of the jurisdiction of the court (requiring the transfer), the transfer may never be effectuated.
Check Mate!
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Don Felder needs a Land Trust
by Randy Hughes on September 27, 2008
If Don would have (and he still could) placed each of his properties into separate land trusts (designating Trustees with different last names from his) he could have avoided being listed in the county records as owner. Don's stalker/fan (Psycho Santa) would have never found him (at least not through the county records method of investigation).
The world is getting crazier by the day. Why risk you and your family's security any longer? Get with it out there, folks! Start using Land Trusts and you will sleep better at night. Maybe the rest of the members of the Eagles Band should take note here.
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Be careful who you buy property with!
by Randy Hughes on August 24, 2008
Most landlords/property owners walk around with a big target on their back because almost all of their hard assets can be discovered by a simple computer search of the local county records. You (or your attorney) do not even have to leave the comfort of your home or office to find out every piece of property that a landlord owns. Why? Because most landlords/property owners hold title to their assets in the own personal names! This is like walking around with a financial statement imprinted on the back of your shirt! Once your assets are known it is not hard to estimate the lawsuit satisfying equity.
Let us take an example of why you should NOT hold title to real property in your name or jointly with others. Case-in-point:
A few years ago I sold out of a real estate investment and took a note back for part of the proceeds. The buyer defaulted on the note and I took him to court. After winning a judgment against the buyer I recorded a "memorandum of judgment" in the county where I knew he owned property (how do you think I found out what he owned?). The memorandum filing was like putting a blanket over everything he owned in his name or with others. He could not make a move without dealing with me first.
As luck (mine not his) would have it, I received a call from a local title insurance company that was trying to close the sale of a property. The problem was that my judgment was a "cloud on the title." As it turned out, the man I had a judgment against owned a property jointly with his daughter. The daughter was trying to sell but could not because of her dad's judgment to me.
After some conversation, I agreed to release my judgment (on that property only) in exchange for ALL of the daughter's equity. This allowed the sale to go through but did not provide any equity to the daughter. I suspect that dad and daughter had a very uncomfortable conversation after closing.
The point here is that if the dad had just put all of his (and his daughter's) real estate holdings into separate land trusts, it would have allowed the sale to go through without my knowledge!
This example is just one of a huge number of reasons to use a land trusts in all that you do with real property.
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Simultaneous Closings
by Randy Hughes on August 03, 2008
In May I was contacted thru email by a seller in distress. The seller and his wife saw my "we buy houses FAST" insert on the bottom of one of my FOR RENT signs and went to my "seller's website" to submit their house information. Once I received their email outlining their situation I called them to make an appointment to see their home. The sellers were in the process of moving out and "leaving the house behind." They had already missed their first house payment and had stopped paying their homeowner's insurance premiums.
I called their lender with them at the kitchen table. We were put thru to the "short sales department" and were told to submit various documents for consideration of a less than full loan payoff. After a month of phone calls and paperwork we closed the deal. Here's the rub.
The buyer under my contract to acquire this property was my Land Trustee. Prior to closing I came to an agreement with a third party buyer who wanted the house to rehab. At closing I assigned my beneficial interest in my Land Trust to the third party buyer and HE closed the deal. This prevented me from having to close the deal myself (and incur closing costs) and then re-selling to my new buyer. Therefore, my net profit was the same as my gross profit.
This method of using a Land Trust also prevented the lender from objecting to the deal as the buyer (the Land Trustee) remained the same throughout the transaction. If you want to do these kind of double-deals, be sure to use a Land Trust for maximum profit and efficiency.
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